Healthcare and bankruptcy are two terms that, unfortunately, these days go hand in hand. Did you know that out of everyone who filed bankruptcy in 2007 (already on track to hit 1.4 million bankruptcies nationally in 2009), 62% of them were medically related. And of those healthcare bankruptcies, 78% of them had some form of health insurance! On top of that, bankruptcy stemming from medical issues rose an incredible 50% from 2001 to 2007!
In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed to keep consumers from taking advantage of the system. It was meant to slow down the process of bankruptcy so that those in debt couldn’t simply look for an easy way out. And it worked, for about a year-and-a-half. In 2007, bankruptcy rates began to rise again, and in the first four months of 2009 bankruptcy numbers have risen 40% as compared to the first 4 months of 2008, according to Bills.com.
Health insurance is big part of a consumer’s struggle with debt and bankruptcy. I mean, think about it. If you have to get a transplant, and your insurance is only willing to cover $10,000 (which I overheard was in fact a reality for a local Arizona couple who had insurance) how much is coming out of your pocket? In reality, how much is coming out of your credit balance as well, and then your home, and then anything else that you can get money from to simply stay alive?
Now, there are a lot of changes happening with healthcare. It seems like every day there is a different legislative discussion about this bill regarding healthcare, or that bill regarding reform. It’s almost hard to keep up. This week, however, the story that caught my attention was the one about changing the bankruptcy rules. Should the bankruptcy laws be more lenient towards those suffering from healthcare debt that has led them to medical bankruptcy? It’s a tough discussion to have, because there are so many emotions involved.
Currently, bankruptcy is bankruptcy, and whether you are filing due to a divorce, credit card debt, foreclosure, or medical expenses, it’s all the same. The bankruptcy code “does not distinguish between debtors driven into bankruptcy by medical bills and those who become insolvent through poor planning or reckless spending.” (DelawareOnline.com) That is why a subcommittee was held this week to discuss the proposed changes.
During the meeting, a mother and father spoke about the loss of their four-and-a-half-year-old son who died from his battle with cystic fibrosis. The healthcare and medical battle that his parents faced just to keep him alive and treated cost them absolutely everything. On top of losing everything, including their son, they dealt with harassment from creditors even while sitting with their son in the hospital. It’s the kind of case where you have to sit back and think, “something’s gotta give.”
Medical Bankruptcy Bullet Points
According to the Associated Press, the proposed changes would look like this:
· Waive the means test and credit counseling requirements.
· Allow debtors to protect their homes from creditors, with an exemption of $250,000.
· Give debtors the option of paying attorneys fees when they are on firmer financial ground after completing the bankruptcy.
Is there anything right about losing your home, cars and dignity for something as unavoidable as sickness and death? While we struggle to keep food on the table and hold on to our over-priced healthcare, we’re probably living in a shroud of false security. It reminds me of those apartment buildings with the gates surrounding it. You know, you have to enter your code to get in, but 90% of the time the gates are broken anyways and wide open. You pay for the secure neighborhood, but it’s never what it seems to be.
Health insurance is no different. It’s that gate protecting the community, but there are many holes in it and once something gets through one of those holes the debt is massive, and bankruptcy is sometimes the only option.
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